American Capital Agency Corp. Reports $(1.57) Comprehensive Loss Per Common Share And $28.93 Net Book Value Per Common Share

American Capital Agency Corp. Reports $(1.57) Comprehensive Loss Per Common
Share And $28.93 Net Book Value Per Common Share
PR Newswire
BETHESDA, Md., May 2, 2013
BETHESDA, Md., May 2, 2013 /PRNewswire/ -- American Capital Agency Corp.
("AGNC" or the "Company") (Nasdaq: AGNC) today reported comprehensive loss for
the first quarter of 2013 of $(557) million, or $(1.57) per common share, and
net book value of $28.93 per common share. Economic return for the period,
defined as dividends on common shares plus the change in net book value per
common share, was a loss of $(1.46) per common share, (4.6)% for the quarter,
or (18.7)% on an annualized basis.
FIRST QUARTER 2013 FINANCIAL HIGHLIGHTS
o$(1.57) comprehensive loss per common share, comprised of:
o$0.64 net income per common share
o$(2.21) other comprehensive income (loss) ("OCI") per common share
+Includes net unrealized losses on investments marked-to-market
through OCI
o$0.78 net spread income per common share
oComprised of interest income, net of cost of funds (including
interest rate swaps) and operating expenses
o$1.18 per common share, including $0.40 per common share of estimated
net carry income (also known as "dollar roll income") associated with
purchases of agency mortgage backed securities ("MBS") on a
forward-settlement basis through the "to-be-announced" ("TBA") dollar
roll market
oIncludes $0.09 per common share of estimated "catch-up" premium
amortization benefit due to change in projected constant prepayment
rate ("CPR") estimates
o$0.50 estimated taxable income per common share
oEstimated taxable income was negatively impacted by net realized
losses of approximately $(0.55) per common share recognized for tax
during the quarter due to monthly settlements of TBA dollar roll
positions during a period of price declines
oTotal estimated net taxable income (loss) attributable to TBA dollar
roll positions was $(0.15) per common share, net of estimated TBA net
carry income
o$1.25 dividend per common share declared on March7, 2013
o$1.08 estimated undistributed taxable income per common share as of
March31, 2013
oDecreased $(319) million from $749 million as of December31, 2012 to
$430 million as of March31, 2013
oOn a per share basis, decreased $(1.13) per common share from $2.21
per common share as of December31, 2012
o$28.93 net book value per common share as of March31, 2013
oDecreased $(2.71) per common share, or (8.6)%, from $31.64 per common
share as of December31, 2012
o(4.6)% economic loss on common equity for the quarter, or (18.7)%
annualized
oComprised of $1.25 dividend per common share and $(2.71) decrease in
net book value per common share
OTHER FIRST QUARTER HIGHLIGHTS
o$76.3 billion investment portfolio as of March31, 2013
o$103.6 billion including net TBA mortgage position as of March31,
2013
o6.5x average leverage for the quarter
o8.2x including average net TBA mortgage position during the quarter
o5.7x leverage as of March31, 2013
o8.1x including net TBA mortgage position as of March31, 2013
o10% actual portfolio CPR for the quarter
o11% actual portfolio CPR for the month of April 2013
o9% average projected portfolio life CPR as of March31, 2013
o1.52% annualized net interest rate spread for the quarter
o1.87% including estimated TBA dollar roll income
oIncludes 16 bps of "catch-up" premium amortization benefit due to
change in projected CPR estimates
o1.43% net interest rate spread as of March31, 2013
o1.71% including net TBA mortgage position as of March31, 2013
o$1.8 billion of net equity proceeds raised from a common stock offering
during the quarter
"Fixed-rate agency MBS prices declined considerably more than both U.S.
Treasury securities and interest rate swaps during the first quarter, as
market participants began to price in an early end to the Federal Reserve's
third round of quantitative easing ("QE3") amid stronger economic data,"
commented Gary Kain, President and Chief Investment Officer. "Specified
mortgage securities also materially underperformed generic securities as
investors focused on extension risk instead of prepayment risk. This
underperformance of both TBAs and specified MBS led to the decline in our net
book value. However, as economic activity both globally and in the U.S. has
weakened over the past month, interest rates have fallen again and mortgages
have recovered some of their first quarter weakness."
"Importantly, prepayments on our portfolio remained low and we continue to
achieve very favorable financing levels on our dollar roll positions," added
Mr. Kain. "Additionally, recent declines in repurchase agreement rates should
benefit our total funding cost. As such, despite what we believe to be
temporary weakness in MBS valuations, our assets continue to perform as
expected from a cash flow perspective. Furthermore, we view the cheapening of
specified mortgages as a good opportunity to add some excellent assets at
attractive valuations."
"Given the magnitude of the Federal Reserve's involvement in the mortgage
market and the shifting sentiment on the strength of the economy, the
volatility we experienced during the quarter is not surprising," said Malon
Wilkus, Chair and Chief Executive Officer. "However, despite the recent
volatility, we believe our portfolio is appropriately positioned to create
excellent risk adjusted returns for our shareholders over the long-term."
NET BOOK VALUE
As of March31, 2013, the Company's net book value per common share was
$28.93, or $(2.71) lower than the December31, 2012 net book value per common
share of $31.64, reflective of generallylower pricing on the Company's MBS
portfolio and due to lower "pay-ups" (or price premiums) on specified pools of
securities with favorable prepayment attributes.
INVESTMENT PORTFOLIO
As of March31, 2013, the Company's investment portfolio totaled $76.3 billion
of agency securities and $27.3 billion of net TBA mortgage positions, at fair
value.
TBA dollar roll transactions are a form of off-balance sheet financing of
agency MBS. The price differential between agency MBS purchased for a forward
settlement date through a TBA dollar roll transaction and the price of agency
MBS for settlement in the current month is referred to as the "price drop".
The price drop is the economic equivalent of the net interest carry (interest
income less implied financing cost), also referred to as "dollar roll income,"
on the agency MBS earned during the roll period. Given the attractive terms
available in the dollar roll market, the Company maintained an average net
forward TBA position of $17.9 billion (cost basis) during the quarter.
The Company accounts for TBA dollar roll positions as derivative instruments
and recognizes dollar roll income in other income (loss), net on the Company's
financial statements. As of March31, 2013, the Company's net TBA mortgage
portfolio had a fair value and cost basis of approximately $27.3 billion and a
net fair value of $(11) million reported in derivative assets/(liabilities) on
the Company's balance sheet.
As of March31, 2013, the Company's agency securities were comprised of $74.8
billion of fixed-rate securities, $0.8 billion of adjustable-rate securities
and $0.7 billion of collateralized mortgage obligations ("CMOs") backed by
fixed and adjustable-rate securities, including principal and interest-only
strips. As of March31, 2013, the Company's fixed-rate securities were
comprised of $22.6 billion less than or equal to 15-year fixed-rate
securities, $0.4 billion 20-year fixed-rate securities and $51.8 billion
30-year fixed-rate securities and the Company's net TBA mortgage portfolio was
comprised of $12.5 billion 15-year net TBA securities and $14.8 billion
30-year net TBA securities, at fair value.
As of March31, 2013, 78% of the Company's fixed-rate securities, or 57%
inclusive of net TBA mortgage positions, were comprised of securities backed
by lower loan balance mortgages and loans originated under the U.S. Government
sponsored Home Affordable Refinance Program ("HARP"), which have favorable
prepayment attributes and, therefore, a lower risk of prepayment relative to
generic agency securities. The Company defines lower loan balance securities
as pools backed by original loan balances of up to $150,000 and HARP
securities as pools backed by 100% refinance loans with original
loan-to-values of greater than or equal to 80%. The remainder of the Company's
portfolio was primarily comprised of low coupon, new issuance fixed-rate
agency securities.
CONSTANT PREPAYMENT RATES
The actual CPR for the Company's investment portfolio during the first quarter
was 10%, unchanged from the fourth quarter. The most recent CPR published in
April 2013 for the Company's portfolio held as of March31, 2013 was 11%. The
weighted average projected CPR for the remaining life of all of the Company's
agency securities held as of March31, 2013 was 9%, a decrease from 11% as of
December31, 2012, primarily due to wider mortgage spreads as compared to
modest increases in the five and 10-year U.S. Treasury rates during the
quarter. The Company's net TBA dollar roll position was concentrated in low
coupon securities and is not included in the CPR calculations above.
The Company amortizes or accretes premiums and discounts associated with
purchases of agency securities into interest income using the effective yield
method over the estimated life of such securities, incorporating both actual
repayments to date and projected CPRs over the remaining life of the
security. The weighted average cost basis of the Company's investment
portfolio was 105.4% of par value as of March31, 2013; therefore, faster
actual or projected prepayments can have a meaningful negative impact, while
slower actual or projected prepayments can have a meaningful positive impact,
on the Company's asset yields.
The amortization of premiums, net of any accretion of discounts, on the
Company's investment portfolio for the first quarter was $(134) million, or
$(0.38) per common share, compared to $(153) million, or $(0.45) per common
share, for the fourth quarter. The change in the Company's weighted average
projected CPR estimate resulted in recognition of approximately $32 million,
or $0.09 per common share, of "catch-up" premium amortization benefit during
the quarter, compared to approximately $37 million, or $0.11 per common share,
of "catch-up" premium amortization benefit during the fourth quarter. The
unamortized net premium balance as of March31, 2013 was $3.8 billion.
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE SPREAD
The Company's average asset yield on its agency security portfolio for the
first quarter was 2.80%, compared to 2.82% for the fourth quarter. Excluding
the impact of "catch-up" premium amortization benefit recognized during the
current and prior quarter due to changes in projected CPR estimates, the
annualized weighted average yield on the Company's agency security portfolio
was 2.64% for the current quarter, compared to 2.63% for the prior quarter.
The Company's average asset yield reported as of March31, 2013 was 2.75%, a
14 bps increase from 2.61% as of December31, 2012.
The Company's average cost of funds (derived from the cost of repurchase
agreements, other debt and interest rate swaps) increased 9 bps to 1.28% for
the first quarter, from 1.19% for the fourth quarter. The Company's average
cost of funds as of March31, 2013 increased 10 bps to 1.32% from 1.22% as of
December31, 2012. The increase in the Company's average cost of funds was
due to higher average swap costs.
The Company's average net interest rate spread for the first quarter was
1.52%, a decrease of 11 bps from the fourth quarter of 1.63%. Including
estimated TBA dollar roll income, the Company's average net interest rate
spread for the first quarter was 1.87%, an increase from 1.84% during the
fourth quarter. The Company's average net spread income for the first quarter
includes 16 bps of "catch-up" premium amortization benefit due to changes in
projected CPR estimates, compared to 19 bps of "catch-up" premium amortization
benefit during the fourth quarter. As of March31, 2013, the Company's
average net interest rate spread was 1.43%, or 1.71% inclusive of net TBA
dollar roll positions, compared to 1.39%, or 1.61% inclusive of net TBA dollar
roll positions as of December31, 2012.
LEVERAGE AND HEDGING ACTIVITIES
As of March31, 2013, the Company had total repurchase agreements and other
debt outstanding of $67.1 billion, resulting in a leverage ratio of 5.7x
including the net payable/receivable for agency securities not yet settled, or
8.1x inclusive of off-balance sheet TBA financing. Average leverage for the
quarter was 6.5x, or 8.2x inclusive of off-balance sheet TBA financing.
The $66.3 billion borrowed under repurchase agreements as of March31, 2013
had original maturities consisting of:
o$8.0 billion of one month or less;
o$29.5 billion from one to three months;
o$11.2 billion from three to six months;
o$4.4 billion from six to nine months;
o$8.1 billion from nine to twelve months;
o$2.1 billion from twelve to twenty-four months;
o$2.8 billion from twenty-four to thirty-six months; and
o$0.2 billion of greater than thirty-six months.
The weighted average original maturity of the Company's repurchase agreements
was 183 days as of March31, 2013, largely unchanged from 181 days as of
December31, 2012. As of March31, 2013, the Company's repurchase agreements
had a weighted average remaining days to maturity of 118 days, unchanged from
December31, 2012.
The Company's interest rate swap positions as of March31, 2013 totaled $51.3
billion in notional amount and had an average fixed pay rate of 1.51%, a
weighted average receive rate of 0.28% and a weighted average maturity of 4.8
years. During the quarter, the Company increased its swap position, including
forward starting swaps ranging up to September 2013, by $5.8 billion, while
$1.4 billion of the Company's shorter duration swaps were terminated during
the quarter. The new swap agreements entered into during the quarter have an
average maturity of approximately 8.8 years from March31, 2013 and a weighted
average fixed pay rate of 1.91%. The Company enters into swaps with longer
maturities with the intention of protecting its net book value and longer term
earnings potential.
The Company utilizes interest rate swaptions to mitigate exposure to larger
changes in interest rates. During the quarter, the Company added $11.2
billion in notional amount of payer swaptions at a cost of $205 million, while
$2.7 billion of payer swaptions from previous quarters expired at an original
cost of $42 million. As of March31, 2013, the Company had $22.9 billion in
payer swaptions outstanding at a market value of $332 million with an average
option term of 17 months and an average underlying interest rate swap term of
7.9 years.
The Company also utilizes short positions in U.S. Treasury securities to
mitigate exposure to increases in interest rates. As of March31, 2013, the
Company had $12.6 billion in notional amount of short Treasury positions and
$0.8 billion in notional amount of short U.S. Treasury futures. As of
March31, 2013, 94% of the Company's outstanding balance of repurchase
agreements, other debt and net TBA dollar roll position was hedged through
interest rate swaps, swaptions and short Treasury positions, an increase from
83% as of December31, 2012.
OTHER INCOME (LOSS), NET
During the quarter, the Company recorded a loss of $(124) million in other
income (loss), net, or $(0.35) per common share. Other income (loss), net is
comprised of:
o$(26) million of net realized losses on sales of agency securities;
o$(84) million of other interest rate swap periodic interest costs
(excludes $(49) million of interest rate swap costs recorded in interest
expense);
o$162 million of net unrealized gains on interest rate swaps;
o$(24) million of interest rate swap termination fees;
o$142 million of TBA dollar roll income;
o$(244) million of net losses on TBA mortgage positions and forward
settling securities; and
o$(50) million of net losses on other derivative instruments and
securities.
Other derivative instruments and securities generally represent instruments
that are used in addition to interest rate swaps (such as swaptions, treasury
securities and treasury futures contracts) to supplement the Company's
interest rate risk management strategies.
OTHER COMPREHENSIVE INCOME (LOSS)
During the quarter, the Company recorded other comprehensive loss of $(788)
million, or $(2.21) per common share, comprised of $(837) million of net
unrealized losses on agency securities and $49 million of net unrealized gains
on interest rate swaps. The net unrealized gains on interest rate swaps
consist of amounts reclassified out of accumulated OCI into interest expense
for the amortization of deferred losses associated with interest rate swaps
that were de-designated as hedges in the third quarter of 2011.
ESTIMATED TAXABLE INCOME
Estimated taxable income for the first quarter was $0.50 per common share, or
$0.14 lower than GAAP net income per common share. The primary differences
between tax and GAAP net income are (i) unrealized gains and losses associated
with interest rate swaps and other derivatives and securities marked-to-market
in current income for GAAP purposes, but excluded from taxable income until
realized or settled, (ii) temporary differences related to the amortization of
premiums paid on investments and (iii) timing differences in the recognition
of certain realized gains and losses.
Estimated taxable income for the quarter was negatively impacted by net
realized losses of approximately $(0.55) per common share recognized for tax
purposes due to monthly settlements of the Company's TBA dollar roll positions
during a period of price declines. By comparison, price changes on the
Company's agency MBS portfolio are recognized for tax purposes upon a sale of
the security. Total estimated net taxable income (loss) attributable to the
Company's TBA dollar roll position was $(0.15) per common share, net of $0.40
estimated net carry income.
FIRST QUARTER 2013 DIVIDEND DECLARATIONS
On March7, 2013, the Board of Directors of the Company declared a first
quarter dividend on its common stock of $1.25 per share, which was paid on
April26, 2013 to common stockholders of record as of March20, 2013. Since
its May 2008 initial public offering, the Company has paid a total of $3.3
billion in common dividends, or $25.11 per common share.
On March11, 2013, the Board of Directors of the Company declared a first
quarter dividend on its 8.000% Series A Cumulative Redeemable Preferred Stock
("Series A Preferred Stock") of $0.50 per share. The dividend was paid on
April15, 2013 to preferred stockholders of record as of April1, 2013.
The Company had approximately $430 million of estimated undistributed taxable
income as of March31, 2013, or $1.08 per common share, net of dividends
declared, but without adjustment for future quarterly dividends not yet
declared on the Company's Series A Preferred Stock.
FINANCIAL STATEMENTS, OPERATING PERFORMANCE AND PORTFOLIO STATISTICS
The following measures of operating performance include net spread income and
estimated taxable income, which are Non-GAAP financial measures. Please refer
to "Use of Non-GAAP Financial Information" later in this release for further
discussion of non-GAAP measures.
AMERICAN CAPITAL AGENCY CORP.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
March 31, December September June 30, March 31,
31, 30,
2013 2012 2012 2012 2012
(unaudited) (unaudited) (unaudited) (unaudited)
Assets:
Agency
securities, at
fair value
(including
pledged
securities of
$70,094, $ 74,874 $ 83,710 $ 88,020 $ 76,378 $ 80,517
$79,966,
$83,600,
$71,809, and
$71,156,
respectively)
Agency
securities
transferred to
consolidated
variable
interest 1,421 1,535 1,620 1,544 53
entities, at
fair value
(pledged
securities)
Cash and
cash 2,826 2,430 2,569 2,099 1,762
equivalents
Restricted 499 399 369 302 315
cash
Derivative
assets, at fair 480 301 292 64 184
value
Receivable
for securities
sold (including
pledged
securities of
$484, $0, 734 — 2,326 2,877 1,706
$1,466,
$2,674, and
$1,442,
respectively)
Receivable
under reverse 12,291 11,818 6,712 1,274 3,613
repurchase
agreements
Other assets 244 260 269 244 267
Total assets $ 93,369 $ 100,453 $ 102,177 $ 84,782 $ 88,417
Liabilities:
Repurchase $ 66,260 $ 74,478 $ 79,254 $ 69,540 $ 69,816
agreements
Debt of
consolidated
variable 862 937 1,008 954 50
interest
entities, at
fair value
Payable for
securities 259 556 1,311 2,198 4,852
purchased
Derivative
liabilities, at 1,217 1,264 1,562 1,250 827
fair value
Dividends 499 427 430 384 286
payable
Obligation
to return
securities
borrowed under 12,548 11,763 7,265 1,269 3,816
reverse
repurchase
agreements, at
fair value
Accounts
payable and 82 132 74 51 52
other accrued
liabilities
Total 81,727 89,557 90,904 75,646 79,699
liabilities
Stockholders'
equity:
8.000%
Series A
Cumulative
Redeemable
Preferred
Stock; $0.01
par
value; 6.9,
6.9, 6.9, 6.9 167 167 167 167 —
and 0.0 shares
issued and
outstanding,
respectively;
liquidation
preference of
$25 per share
($173)
Common
stock, $0.01
par value;
600.0, 600.0,
600.0, 600.0,
and 300.0
shares
authorized; 4 3 3 3 3
396.5, 338.9,
341.6, 304.8,
and 300.0
shares issued
and
outstanding,
respectively
Additional 11,261 9,460 9,536 8,296 8,141
paid-in capital
Retained
(deficit) (557) (289) (672) (328) 317
earnings
Accumulated
other 767 1,555 2,239 998 257
comprehensive
income
Total
stockholders' 11,642 10,896 11,273 9,136 8,718
equity
Total
liabilities and $ 93,369 $ 100,453 $ 102,177 $ 84,782 $ 88,417
stockholders'
equity
Net book value
per common $ 28.93 $ 31.64 $ 32.49 $ 29.41 $ 29.06
share
AMERICAN CAPITAL AGENCY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
Three Months Ended
March 31, December September June 30, March
31, 30, 31,
2013 2012 2012 2012 2012
Interest income:
Interest income $ 547 $ 570 $ 520 $ 504 $ 514
Interest expense ^(1) 140 147 139 120 106
Net interest income 407 423 381 384 408
Other (loss) income, net:
(Loss) gain on sale of (26) 353 210 417 216
agency securities, net
(Loss) gain on
derivative instruments and (98) 89 (460) (1,029) 47
other securities, net ^(1)
Total other (loss) (124) 442 (250) (612) 263
income, net
Expenses:
Management fees 33 31 32 28 22
General and 9 9 8 8 6
administrative expenses
Total expenses 42 40 40 36 28
Income (loss) before income 241 825 91 (264) 643
tax provision (benefit)
Income tax provision 10 15 5 (3) 2
(benefit)
Net income (loss) 231 810 86 (261) 641
Dividend on preferred 3 3 3 3 —
stock
Net income (loss) available
(attributable) to common $ 228 $ 807 $ 83 $ (264) $ 641
shareholders
Net income (loss) $ 231 $ 810 $ 86 $ (261) $ 641
Other comprehensive (loss)
income:
Unrealized (loss) gain
on available-for-sale (837) (734) 1,190 689 (106)
securities, net
Unrealized gain on
derivative instruments, net 49 50 51 52 52
^(1)
Other comprehensive (loss) (788) (684) 1,241 741 (54)
income
Comprehensive (loss) income (557) 126 1,327 480 587
Dividend on preferred 3 3 3 3 —
stock
Comprehensive (loss) income
(attributable) available to $ (560) $ 123 $ 1,324 $ 477 $ 587
common shareholders
Weighted average number of
common shares outstanding - 356.2 340.3 332.8 301.0 240.6
basic and diluted
Net income (loss) per
common share - basic and $ 0.64 $ 2.37 $ 0.25 $ (0.88) $ 2.66
diluted
Comprehensive (loss) income
per common share - basic $ (1.57) $ 0.36 $ 3.98 $ 1.58 $ 2.44
and diluted
Estimated REIT taxable
income per common share - $ 0.50 $ 1.93 $ 1.36 $ 1.62 $ 2.03
basic and diluted
^(2)
Dividends declared per $ 1.25 $ 1.25 $ 1.25 $ 1.25 $ 1.25
common share
AMERICAN CAPITAL AGENCY CORP.
RECONCILIATION OF GAAP NET INTEREST INCOME TO ADJUSTED NET INTEREST INCOME AND
NET SPREAD INCOME^(2)
(in millions, except per share data)
(unaudited)
Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2013 2012 2012 2012 2012
Interest income $ 547 $ 570 $ 520 $ 504 $ 514
Interest expense:
Repurchase
agreements and 91 97 88 68 54
other debt
Interest rate
swap periodic 49 50 51 52 52
costs^(1)
Total interest 140 147 139 120 106
expense
Net interest 407 423 381 384 408
income
Other interest
rate swap 84 77 74 62 39
periodic costs
^(3)
Adjusted net 323 346 307 322 369
interest income
Operating 42 40 40 36 28
expenses
Net spread income 281 306 267 286 341
Dividend on 3 3 3 3 —
preferred stock
Net spread income
available to $ 278 $ 303 $ 264 $ 283 $ 341
common
shareholders
Weighted average
number of common
shares 356.2 340.3 332.8 301.0 240.6
outstanding -
basic and diluted
Net spread income
per common share $ 0.78 $ 0.89 $ 0.79 $ 0.94 $ 1.42
- basic and
diluted
AMERICAN CAPITAL AGENCY CORP.
RECONCILIATION OF GAAP NET INCOME TO ESTIMATED TAXABLE INCOME^(2)
(in millions, except per share data)
(unaudited)
Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2013 2012 2012 2012 2012
Net income (loss) $ 231 $ 810 $ 86 $ (261) $ 641
Book to tax
differences:
Premium (34) (19) 55 43 (28)
amortization, net
Realized (53) (16) 167 54 (46)
(gain) loss, net
Unrealized 30 (121) 128 647 (80)
(gain) loss, net
Other^ 6 6 20 9 2
Total book to tax (51) (150) 370 753 (152)
differences
Estimated REIT 180 660 456 492 489
taxable income
Dividend on 3 3 3 3 —
preferred stock
Estimated REIT
taxable income
available to $ 177 $ 657 $ 453 $ 489 $ 489
common
shareholders
Weighted average
number of common
shares 356.2 340.3 332.8 301.0 240.6
outstanding -
basic and diluted
Estimated REIT
taxable income
per common share $ 0.50 $ 1.93 $ 1.36 $ 1.62 $ 2.03
- basic and
diluted
Estimated
cumulative
undistributed $ 1.08 $ 2.21 $ 1.52 $ 1.61 $ 1.28
REIT taxable
income per common
share ^(4)
AMERICAN CAPITAL AGENCY CORP.
KEY STATISTICS*
(in millions, except per share data)
(unaudited)
Three Months Ended
March 31, December 31, September June 30, March 31,
30,
Key Balance Sheet 2013 2012 2012 2012 2012
Statistics:
Fixed-rate agency
securities, at $ 74,829 $ 83,635 $ 87,882 $ 75,732 $ 77,675
fair value - as
of period end
Adjustable-rate
agency
securities, at $ 794 $ 891 $ 992 $ 1,072 $ 2,500
fair value - as
of period end
CMO agency
securities, at $ 157 $ 173 $ 191 $ 568 $ 228
fair value - as
of period end
Interest-only
strips agency
securities, at $ 272 $ 292 $ 307 $ 276 $ 133
fair value - as
of period end
Principal-only
strips agency
securities, at $ 243 $ 254 $ 268 $ 274 $ 34
fair value - as
of period end
Total agency
securities, at $ 76,295 $ 85,245 $ 89,640 $ 77,922 $ 80,570
fair value - as
of period end
Total agency
securities, at $ 75,088 $ 83,193 $ 86,850 $ 76,352 $ 79,687
cost - as of
period end
Total agency
securities, at $ 71,253 $ 78,788 $ 82,435 $ 72,683 $ 76,023
par - as of
period end ^(5)
Average agency
securities, at $ 78,009 $ 80,932 $ 81,500 $ 74,007 $ 61,962
cost
Average agency
securities, at $ 73,922 $ 76,710 $ 77,519 $ 70,549 $ 59,082
par ^(5)
Net TBA portfolio
- as of period $ 27,283 $ 12,870 NM NM NM
end, at fair
value
Average net TBA
portfolio, at $ 17,892 $ 13,069 NM NM NM
cost
Average
repurchase $ 70,591 $ 74,649 $ 75,106 $ 67,997 $ 57,480
agreements and
other debt
Average
stockholders' $ 10,843 $ 11,177 $ 10,602 $ 9,071 $ 6,984
equity ^(6)
Net book value
per common share $ 28.93 $ 31.64 $ 32.49 $ 29.41 $ 29.06
as of period end
^(7)
Leverage -
average during 6.5:1 6.7:1 7.1:1 7.5:1 8.2:1
the period ^(8)
Leverage -
average during
the period, 8.2:1 7.8:1 NM NM NM
including net TBA
position
Leverage - as of 5.7:1 7.0:1 7.0:1 7.6:1 8.4:1
period end ^(9)
Leverage - as of
period end, 8.1:1 8.2:1 NM NM NM
including net TBA
position
Key Performance
Statistics:
Average coupon 3.68 % 3.77 % 3.81 % 3.96 % 4.15 %
^(10)
Average asset 2.80 % 2.82 % 2.55 % 2.73 % 3.32 %
yield ^(11)
Average cost of (1.28) % (1.19) % (1.13) % (1.08) % (1.01) %
funds ^(12)
Average net
interest rate 1.52 % 1.63 % 1.42 % 1.65 % 2.31 %
spread ^(13)
Average net
interest rate
spread, including 1.87 % 1.84 % NM NM NM
estimated TBA
dollar roll
income ^(14)
Average coupon - 3.73 % 3.69 % 3.77 % 3.86 % 3.99 %
as of period end
Average asset
yield - as of 2.75 % 2.61 % 2.61 % 2.81 % 3.06 %
period end
Average cost of
funds - as of (1.32) % (1.22) % (1.11) % (1.19) % (0.99) %
period end ^(15)
Average net
interest rate 1.43 % 1.39 % 1.50 % 1.62 % 2.07 %
spread - as of
period end
Average net
interest rate
spread - as of
period end, 1.71 % 1.61 % NM NM NM
including
estimated TBA
dollar roll
income ^(14)
Average actual
CPR for 10 % 10 % 9 % 10 % 10 %
securities held
during the period
Average
forecasted CPR - 9 % 11 % 14 % 12 % 9 %
as of period end
Total premium $ (134) $ (153) $ (219) $ (196) $ (100)
amortization, net
Expenses % of
average total 0.22 % 0.16 % 0.17 % 0.18 % 0.16 %
assets
Expenses % of
average 1.57 % 1.42 % 1.50 % 1.59 % 1.60 %
stockholders'
equity
Net comprehensive
income (loss)
return on average (21.3) % 4.4 % 50.4 % 21.5 % 33.7 %
common equity -
annualized ^(16)
Dividends
declared per $ 1.25 $ 1.25 $ 1.25 $ 1.25 $ 1.25
common share
Economic (loss)
return on common (18.7) % 4.9 % 58.6 % 22.1 % 37.7 %
equity -
annualized ^(17)
*Except as noted below, average numbers for each period are weighted based on
days on the Company's books and records. All percentages are annualized.
NM = Not meaningful. Prior to the fourth quarter of 2012, the Company's net
TBA position primarily consisted of short TBAs used for hedging purposes.
1.The Company voluntarily discontinued hedge accounting under GAAP for
interest rate swaps as of September 30, 2011. Accumulated other comprehensive
loss ("OCI") on the Company's de-designated interest rate swaps as of
September 30, 2011 is being amortized on a straight-line basis over the
remaining swap terms into interest expense. All other periodic interest
costs, termination fees and mark-to-market adjustments associated with
interest rate swaps are reported in other income (loss), net pursuant to
GAAP.
2. Table includes non-GAAP financial measures. Refer to "Use of Non-GAAP
Financial Information" for additional discussion of non-GAAP financial
measures.
3.Other interest rate swap periodic costs represent periodic interest
costs on the Company's interest rate swap portfolio in excess of amounts
reclassified from accumulated OCI into interest expense. Other interest rate
swap periodic costs does not include termination fees or mark-to-market
adjustments associated with interest rate swaps.
4.Estimated cumulative undistributed REIT taxable income as of period end
is net of common and preferred dividends declared during the period, without
adjustment for future quarterly dividends not yet declared on the Company's
Series A Preferred Stock. Amount divided by total common shares outstanding
as of each period end.
5.Agency securities par value excludes the underlying unamortized
principal balance ("UPB") of the Company's interest-only securities.
6.Average stockholders' equity calculated as the average month-ended
stockholders' equity during the quarter.
7.Net book value per common share calculated as total stockholders'
equity, less the Company's Series A Preferred Stock liquidation preference of
$25 per preferred share, divided by the number of common shares outstanding as
of period end.
8.Leverage during the period was calculated by dividing the daily weighted
average repurchase agreements and other debt outstanding, less repurchase
agreements for treasury securities, for the period by the average
stockholders' equity for the period.
9.Leverage at period end was calculated by dividing the sum of the amount
outstanding under repurchase agreements, net receivable / payable for
unsettled agency securities and other debt by total stockholders' equity at
period end.
10.Weighted average coupon for the period was calculated by dividing the
total coupon (or cash) interest income on agency securities by average agency
securities held at par.
11.Weighted average asset yield for the period was calculated by dividing
the total interest income on agency securities (coupon interest less
amortization of premiums and discounts) by the average amortized cost of
agency securities held.
12.Cost of funds includes repurchase agreements, other debt and interest
rate swaps, but excludes swap termination fees and costs associated with other
supplemental hedges such as swaptions and short treasury or TBA positions.
Weighted average cost of funds for the period was calculated by dividing the
total cost of funds by the average repurchase agreements and other debt
outstanding, less repurchase agreements for treasury securities, for the
period.
13.Net interest rate spread for the period was calculated by subtracting the
average cost of funds from the average asset yield.
14.Estimated TBA dollar roll income is net of short TBAs used for hedging
purposes. Dollar roll income excludes the impact of other supplemental hedges,
and is recognized in gain (loss) on derivative instruments and other
securities, net.
15.Cost of funds as of period end includes repurchase agreements and other
debt outstanding, plus the impact of interest rate swaps in effect as of each
period end and forward starting swaps becoming effective, net of swaps
expiring, within three months of each period end, but excludes costs
associated with other supplemental hedges such as swaptions and short treasury
or TBA positions.
16.Net comprehensive income (loss) return on average common equity for the
period was calculated by dividing comprehensive (loss) income (attributable)
available to common shareholders by average common equity.
17.Economic (loss) return on common equity represents the sum of the change
in net asset value per common share and dividends declared on common stock
during the period over the beginning net asset value per common share.
STOCKHOLDER CALL
AGNC invites stockholders, prospective stockholders and analysts to attend the
AGNC stockholder call on May3, 2013 at 11:00 am ET. The stockholder call can
be accessed through a live webcast, free of charge, at www.AGNC.comor by
dialing (888) 317-6016 (U.S. domestic) or (412) 317-6016 (international).
Please advise the operator you are dialing in for the American Capital Agency
stockholder call. If you do not plan on asking a question on the call and
have access to the internet, please take advantage of the webcast.
A slide presentation will accompany the call and will be available at
www.AGNC.com. Select the Q1 2013 Earnings Presentation link to download and
print the presentation in advance of the Stockholder Call.
An archived audio of the shareholder call combined with the slide presentation
will be made available on the AGNC website after the call on May3, 2013. In
addition, there will be a phone recording available from 1:00 pm ET May3,
2013 until 9:00 am ET May 17, 2013. If you are interested in hearing the
recording of the presentation, please dial (877) 344-7529 (U.S. domestic) or
(412) 317-0088 (international). The conference number is 10027585.
For further information, please contact Investor Relations at (301) 968-9300
or IR@AGNC.com.
ABOUT AMERICAN CAPITAL AGENCY CORP.
American Capital Agency Corp. is a real estate investment trust ("REIT") that
invests in agency pass-through securities and collateralized mortgage
obligations for which the principal and interest payments are guaranteed by a
U.S. Government agency or a U.S. Government-sponsored entity. The Company is
externally managed and advised by American Capital AGNC Management, LLC, an
affiliate of American Capital, Ltd. For further information, please refer to
www.AGNC.com.
ABOUT AMERICAN CAPITAL, LTD.
American Capital, Ltd. (NASDAQ: ACAS) is a publicly traded private equity firm
and global asset manager. American Capital, both directly and through its
asset management business, originates, underwrites and manages investments in
middle market private equity, leveraged finance, real estate and structured
products. American Capital manages $21.2 billion of assets, including assets
on its balance sheet and fee earning assets under management by affiliated
managers, with $117 billion of total assets under management (including
levered assets). Through an affiliate, American Capital managespublicly
traded American Capital Agency Corp. (NASDAQ: AGNC) with approximately a$13
billion market capitalization and American Capital Mortgage Investment Corp.
(NASDAQ: MTGE) with approximately a$1.5 billion market capitalization. From
its eight offices in the U.S. and Europe, American Capital and its affiliate,
European Capital, will consider investment opportunities from $10 million to
$750 million. For further information, please refer to
www.AmericanCapital.com.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements. Forward-looking
statements are based on estimates, projections, beliefs and assumptions of
management of the Company at the time of such statements and are not
guarantees of future performance. Forward-looking statements involve risks
and uncertainties in predicting future results and conditions. Actual results
could differ materially from those projected in these forward-looking
statements due to a variety of factors, including, without limitation, changes
in interest rates, changes in the yield curve, changes in prepayment rates,
the availability and terms of financing, changes in the market value of the
Company's assets, general economic conditions, market conditions, conditions
in the market for agency securities, and legislative and regulatory changes
that could adversely affect the business of the Company. Certain factors that
could cause actual results to differ materially from those contained in the
forward-looking statements, are included in the Company's periodic reports
filed with the Securities and Exchange Commission ("SEC"). Copies are
available on the SEC's website, www.sec.gov. The Company disclaims any
obligation to update or revise any forward-looking statements based on the
occurrence of future events, the receipt or new information, or otherwise.
USE OF NON-GAAP FINANCIAL INFORMATION
In addition to the results presented in accordance with GAAP, this release
includes certain non-GAAP financial information, including net spread income,
estimated taxable income and certain financial metrics derived from non-GAAP
information, such as estimated undistributed taxable income, which the
Company's management uses in its internal analysis of results, and believes
may be informative to investors.
Net spread income consists of adjusted net interest income, less total
operating expenses. Adjusted net interest income is interest income less
interest expense (or "GAAP net interest income"), less other periodic interest
rate swap interest costs reported in other income (loss), net.
Estimated taxable income is pre-tax income calculated in accordance with the
requirements of the Internal Revenue Code rather than GAAP. Estimated taxable
income differs from GAAP income because of both temporary and permanent
differences in income and expense recognition. Examples include (i) unrealized
gains and losses associated with interest rate swaps and other derivatives and
securities marked-to-market in current income for GAAP purposes, but excluded
from estimated taxable income until realized or settled, (ii) temporary
differences related to the amortization of premiums paid on investments and
(iii) timing differences in the recognition of certain realized gains and
losses. Furthermore, estimated taxable income can include certain information
that is subject to potential adjustments up to the time of filing of the
appropriate tax returns, which occurs after the end of the calendar year of
the Company.
The Company believes that these non-GAAP financial measures provide
information useful to investors because net spread income is a financial
metric used by management and investors and estimated taxable income is
directly related to the amount of dividends the Company is required to
distribute in order to maintain its REIT tax qualification status. The
Company also believes that providing investors with net spread income,
estimated taxable income and certain financial metrics derived based on such
estimated taxable income, in addition to the related GAAP measures, gives
investors greater transparency to the information used by management in its
financial and operational decision-making. However, because net spread income
and estimated taxable income are an incomplete measure of the Company's
financial performance and involve differences from net income computed in
accordance with GAAP, net spread income and estimated taxable income should be
considered as supplementary to, and not as a substitute for, the Company's net
income computed in accordance with GAAP as a measure of the Company's
financial performance. In addition, because not all companies use identical
calculations, the Company's presentation of net spread income and estimated
taxable income may not be comparable to other similarly-titled measures of
other companies.
CONTACT:
Investors - (301) 968-9300
Media - (301) 968-9400
SOURCE American Capital Agency Corp.
Website: http://www.AGNC.com